Binance Case Transferred to Florida Under First-to-File Rule

A US judge has granted Binance’s motion to transfer a case involving allegations it facilitated money laundering to the Southern District of Florida. The decision was based on the first-to-file rule, which prioritizes the jurisdiction where the initial lawsuit was filed. The case, originally filed in August 2024 in Washington, was transferred due to a similar lawsuit filed in June 2023 in Florida. Both cases accuse Binance of allowing cybercriminals to use the platform for money laundering.

US District Judge Barbara Rothstein noted that although the two complaints describe the proposed classes in slightly different terms, both encompass the same proposed class of individuals whose cryptocurrency was stolen and transferred to a Binance.com account during the relevant period. Therefore, the court concluded that the classes of plaintiffs are sufficiently similar to warrant application of the first-to-file rule.

The first-to-file rule allows a court to decline a ruling on a matter when a complaint involving the same parties and issues has already been filed in another district. Generally, the court that first hears the case usually retains jurisdiction. This rule is designed to prevent forum shopping and ensure that similar cases are handled in the same jurisdiction.

Lawyers acting for the plaintiffs in the Washington case argued that it differed from the Florida suit because it added other accusations not present in the Florida lawsuit and named former CEO Changpeng “CZ” Zhao as a defendant. They also argued that transferring the case could postpone both court actions to the “detriment of all plaintiffs.” However, Judge Rothstein said in her ruling that it’s not apparent transferring the suit would delay resolution in either case, and would promote efficiency by “avoiding duplicative litigation,” which is one of the “first-to-file rule’s purposes.”

Three crypto investors launched a suit in August 2024 against Binance and CZ in Washington, alleging their crypto was stolen and the funds were sent to Binance by the thieves to launder the funds. A year before, Michael Osterer filed his lawsuit in Florida in June 2023, alleging Binance aided the conversion of stolen crypto. A Florida court ordered the case to arbitration in July 2024.

The transfer of the lawsuit to Florida is a strategic move that could benefit both parties involved. For Binance, it means that the legal battle will be fought in a single jurisdiction, potentially reducing the costs and resources required to defend against multiple lawsuits. For the plaintiffs, it ensures that their case will be heard in a court that has jurisdiction over the alleged activities, increasing the likelihood of a fair and just outcome.

This decision centralizes the legal proceedings in a single district, potentially streamlining the process and reducing the complexity of managing multiple jurisdictions. The move underscores the importance of legal strategy in high-stakes litigation and could have implications for future cases involving similar allegations. By invoking the first-to-file rule, Binance has demonstrated its commitment to resolving the allegations in a timely and efficient manner. This could set a precedent for future cases involving similar allegations, as other companies may follow suit in seeking to consolidate their legal efforts in a single jurisdiction.